The state’s argument rests on the distribution model of the big agencies. When you book a $150 room with a hotel directly, the rate you reserve is the top-line number the hotel receives. Taxes are calculated on the basis of that $150 price, and submitted to governments accordingly. When you book with an Orbitz, Expedia, Travelocity, Priceline, or Hotwire, you may be paying one price, but the agency is paying another. So you may pay $150, but a Travelocity may be paying $100 to the hotel and keeping $50 in profit. For such reservations, the hotel submits taxes based on the $100 wholesale price. State and local governments argue that they should be receiving the taxes based on the retail rate, not the wholesale. So a thousand lawsuits bloom.

When I visited Orbitz headquarters in Chicago at the end of September, I asked Brian Hoyt, the company’s Vice President of Corporate Communications & Government Affairs, about this legal trend. Hoyt replied that the premise of these suits was fundamentally wrong: The lawsuits presumed that the agency was the hotelier, when in fact they were just the middleman, adding a convenience charge to the booking that they negotiated for their customers. “Orbitz is no more a hotelier than Ticketmaster is a baseball team.”

But the state of Florida has just upgraded Orbitz to the big leagues.

I’ve been sympathetic to the agencies on this front since I first posted about it in May. But the agencies aren’t doing themselves any favors: The problem for Orbitz and their peers is exacerbated by the fact that the agencies don’t break out their prices in a transparent manner. The $150 rate in the example above doesn’t show up as $100 plus $50 in fees. It shows up as $150.

Further, the agencies tack on extra “taxes & fees” (reduced recently, admittedly, but still there) without explaining the breakdown. Since the margins on hotel bookings are fat, and the taxes are based on the lower wholesale rate, there’s some room for profit in those fees, too. (It’s much like the “handling” in “shipping and handling” charges.)

The Florida case is a huge deal for the agencies, and the consumers who book there. Just the Orlando and Miami bookings alone would hurt the companies’ bottom line.

Let’s assume for the moment that the agencies lose this battle, regardless of the merits of the argument. One strategy would be to lobby for a federal solution, in which a national legal standard for tax collection is determined and applied federally. Another strategy would be to reform the ways in which agencies quote hotel rates.

Look at the these two current examples of hotel rate and tax quotation:

Expedia:

Orbitz:

Same hotel, same dates. First off, note the slight variation between the agencies. The difference may be due to variation in negotiated rates, or in fees. But you won’t ever know, because the agencies aren’t telling you what you’re actually buying.

I can understand the why the agencies want to keep their real rates quient. But since the prices aren’t broken out, it’s possible for states like Florida to launch lawsuits. If the agencies can’t get a federal solution, they may need to start quoting the wholesale rates plus the fees.

And if these lawsuits lead to greater price transparency, that’s going to be a huge change.

Ric argues that hotel companies’ own best-rate-guarantee programs are superior to the new Travelocity program, for three reasons: 1) Travelocity caps the number of claims to 5 per customer per month. Hotel chains typically don’t place such a limit. 2) Group rates, such as AAA rates, aren’t covered by the Travelocity guarantee. 3) The loyalty benefits of booking through the hotels’ own sites exceeds the value of the potential rebate via Travelocity.

Ric’s argument may make sense for the high-frequency traveler with high frequent-guest program status — and established loyalty to a given brand, as his blog name implies. But the Achilles heel of the hotel chains’ programs remains their timeframe for making a claim. If you only have hours after purchase to find a lower rate, that’s not a really meaningful guarantee. To Travelocity’s credit (and, to a lesser extent, Orbitz’s credit) the agency’s rebate lasts days, weeks, or even months. And the five-claim limit per month won’t be a problem for all but the most high-volume travelers.

The Travelocity guarantee is far from perfect, as I’ve argued. But it’s not worth dismissing wholesale in favor of the hotels’ own programs.

Here’s their pitch:

While competing sites offer price protection on hotel bookings only when lower prices are found on their respective sites, or only within the supplier`s cancellation window, Travelocity customers who find the same hotel booking for less elsewhere online (excluding hotels booked using a name-your-own-price service) any time prior to the day of check-in, can notify Travelocity and receive a refund for the difference in price. Additionally, as a special offer to introduce the hotel price match guarantee, between now and Dec. 31, 2009, customers will also receive a $50 discount toward future travel.

The new guarantee is aimed at two competitors: the hotels’ own lowest-price guarantees, and Orbitz.

Hotel websites typically offer a 24-hour window for filing a claim if you can find a lower rate. (See Hyatt’s terms, for example.) That’s not that impressive.

Orbitz offers an automatic refund (”Price Assurance”) if another customer on Orbitz books the same room for the same dates at a lower rate. Those are some slim odds. Yes, it’s automatic, but again, the odds are against your ever seeing a penny.

Travelocity’s guarantee is stronger than both of these offerings, insofar as the rate simply has to drop, and in a huge window of opportunity. But since you have to do the legwork and call Travelocity in order to get the refund, they are effectively betting that you won’t be tracking rates on a regular basis.

To be clear, this is only relevant (and possible) for prepaid reservations anyway. A cancelable reservation can always be replaced with a new reservation at a lower rate, after all, should the price drop. Travelocity calls their prepaid rooms “Good Buys” so look for that label to be covered by the new guarantee.

So, how DO you track rates once you’ve booked? Bring in Yapta.

Yapta allows you to receive updates when rates drop for specific hotels’ rooms (they do it for airfare, as well). So if you book a hotel room on Travelocity, you should immediately run a search for that specific hotel on Yapta, then select “track price drops.” If the price goes down, you get an e-mail. Then, contact Travelocity. Collect refund.

I don’t believe Travelocity was counting on customers using automated assistance when they launched this. But they’re about to find out if this is a feature they can actually sustain.

Related:
- Orbitz Price Assurance re-examined: Real savings or gimmick?
- Check in the mail: Orbitz refunds airfare price drops, but is it worthwhile?
- Less Choice: Expedia excluding hotels from searches
- Track airfare before and AFTER you buy?

The alleged reason? Here’s a quote from the piece, for the wonkish:

For some time now, we have been hearing from many industry sources that during renewal negotiations Expedia/Hotels.com has demanded new terms and conditions that are against everything the hospitality industry stands for: last room availability, guarantees that the best rates are only found on Expedia/Hotels.com sites, penalties to properties that do not use their sites 100% of the time, etc. These contract renewal “negotiations” have been described to us by some participants from various hotel companies as “here are our terms – take it or leave it”-type of meetings and “practically lack of any essence of a real negotiation,” etc.

In other words, these new terms and conditions demanded by Expedia will effectively take away hoteliers’ rights to manage inventory and rates at their own hotels, destroy channel management and rate parity, and will eventually lead to a long-term erosion of hotel brand and price integrity in the same manner it did after 9/11 in 2001.

Since Choice is apparently not playing along, they’re missing from search results on Expedia-owned sites. That means that customers looking for a hotel will have to look somewhere other than Expedia if they want a more complete picture of the lodging landscape. That’s nearly 5000 properties that are off of Expedia’s grid. And there may be others.

Granted, the Choice properties (Quality, Comfort, Econolodge, Clarion) aren’t ones that I long to be staying at. You may not miss them. But for the budget-minded or the roadside sleep-seeker, these brands are generally reliable, standard motel fare. And now, on Expedia, it’s as if the hotels didn’t exist.

Part of me doesn’t have a problem with this. The big online travel agencies aren’t search engines. They’re businesses, and they’re trying to make as much money as they can. They don’t claim to represent every hotel in the world, and it’s their prerogative to keep out a company that isn’t willing to ante up.

But for consumers, it makes apples-to-apples comparisons harder, and thus makes loyalty to a single agency hard to justify. It also makes metasearch more important. Using a search like Kayak, which once claimed to want to catalog every hotel on the planet, looks more attractive for first-cut hotel searches.

Expedia is risking losing customers’ trust. If the agency wants to hardball its suppliers, that’s its option. But consumers would be right to ask if Expedia is in their corner.

Upgraded: Snakes in a car
A Florida woman got in her Enterprise rental car, only to find a 3 1/2 foot long red rat snake on the dashboard. Will “snake availability waivers” be the next add-on fee? And was it a Dodge Viper?

Upgraded: Convictions of liquid bombers
Prosecutors in the UK convicted three men of conspiracy to murder, as part of the 2006 liquid-explosives threat. Prosecutors want to re-try three of the men, for whom the jury could not reach a verdict. In connection with the trial, the BBC released a video ostensibly showing a liquid bomb of the type planned by the convicts.

Upgraded: Newcastle airport
UK officials are testing liquid-explosives scanners at Newcastle airport, using a device that scans liquid containers to judge whether their contents are a potential bomb ingredient or a harmless beverage, facial cream, or toothpaste. Could the 3-ounce liquid limit be up for review?… stay tuned.

Upgraded: Singapore’s A380
Global travel is in a slump. But if you’re expecting an empty seat in coach on board a Singapore Airbus A380, guess again. People still pack the plane. Full planes don’t mean a fat bottom line, though. The airline isn’t getting top dollar per ticket, even if the public seems to like the plane.

Upgraded: Hotel deals
The average rate for hotel rooms has dropped 17% in the first half of 2009 alone, making the average room the cheapest its been in five years. Bucking the trend: rates in Caribbean, down only 2% on average. (I’m sure there’s still a lot of variation between islands.)

Downgraded: Block 37
For years, “block 37″ in the center of the Chicago Loop (the block is bounded by Randolph, State, Washington, and Dearborn) stood vacant. It’s a construction site now, with plans for a central transit hub underground. And above ground, a Loews Hotel was planned, with rights sold to the company for $1. But the hotel chain can’t (or won’t) get financing for this prime downtown location, so yet another hotel project is up in the air.

Normally, I’m skeptical of these deals, because it’s often hard to find availability for the dates and locations you really want. But I just ran a few searches myself, and found good deals at properties in Berlin, Tucson, and Los Cabos. Then again, I had no luck finding rooms available through this offer at any property and date combination I searched for anywhere in California. Your mileage may vary, of course, but it’s definitely worth checking out.

Hat tip to Julia Bainbridge writing on Wendy Perrin’s page over at Conde Nast.

(image)

Downgraded: American’s luggage fees
Speaking of fees, this is more or less the norm: American is raising its checked baggage fees by $5, both for the first piece (now $20) and the second ($30).

Downgraded: Open Skies
OpenSkies, the all-premium class British Airways subsidiary, is dropping its New York-JFK to Amsterdam route and is focusing entirely on flights from Paris to Newark and JFK. Just days after announcing that the airline was for sale. A shame.

Downgraded: Government architecture
Just when they started making customs and border crossing buildings a little more interesting, they go ahead and roll it all back: The 21-foot-high letters spelling “United States” were deemed a target, and thus a security risk. Words fail me.

Upgraded: Deals at Starwood hotels
Starwood is cutting rates by up to 50%, albeit off rack rates. “Limited time only,” they say, but no end date.

Upgraded: Headline writing
A Southwest Airlines flight made an emergency landing shortly after leaving Hartford, due to an electrical problem emanating from a coffeemaker, but you’ve gotta love the Times of London’s headline for the incident: “Southwest Airlines flight grounded by coffee aroma.”

Upgraded: Eco-designations for hotels
AAA is planning to note an “eco-friendly” designation in their TourBook travel guides for properties that participate in local, regional, or third-party eco-accreditation systems. The patchwork approach means that a hotel might make the cut in one state but not in another, based on regional variation.

Downgraded: Bangkok airport duty-free
If you’re in Bangkok, you might want to skip the duty-free shop. Customers have been falsely accused (better: framed) of shoplifting. And thanks to an apparently collusive agreement between the police, the duty free operator (King Power), and individual “translators,” all working in cahoots, travelers have been forced to pay up thousands of dollars in order to leave the country. “The British Embassy has also warned passengers at Bangkok Airport to take care not to move items around in the duty free shopping area before paying for them, as this could result in arrest and imprisonment.” Absurd! Read the whole convoluted story of the “zig zag scam” here.

Downgraded: OpenSkies
British Airways is looking to sell its all-business class OpenSkies subsidiary, only a year after buying L’Avion and merging the two operations. The airline-in-an-airline is still operating, though, and there are some pretty sweet deals for premium class travel. If you’re flying between New York and Amsterdam or Paris anytime soon and looking for a relatively inexpensive upgrade, this could be the ticket. (~$1230 all-in roundtrip for a 140° cradle seat, or ~$2100 for a 180° flat bed.) But I wouldn’t book more than a month or two out.

Upgraded: Inflight internet overseas
Lufthansa is reportedly exploring ways of restarting the now-defunct Boeing Connexion satellite-powered inflight internet service. The receivers are already installed on many of their planes (a process which was undertaken at a hefty cost. Panasonic is the most likely provider of the services to the airline.

Downgraded: The St. Regis Monarch Beach
Upgraded: Irony
You may recall the St. Regis Monarch Beach in California as the site of controversy — Weeks after accepting a huge federal bailout, AIG executives spent nearly half a million smackers to host a swank affair at the resort. Now the resort itself has gone into receivership: Creditor Citigroup has foreclosed on the property, taking possession from the franchisees, Makar Properties. (Perhaps not surprising if reports of 15% occupancy rates are true.) But foreclosure doesn’t mean closure. The property remains open, albeit under new ownership.

Upgraded: Exotic inflight vermin
Paging Samuel L. Jackson! A passenger on a Southwest Airlines flight departing Phoenix was stung by a scorpion in flight. The creature fell out of luggage in the overhead bin, where numerous other scorpions were residing.

Downgraded: Budget Rent-a-Car’s ethics
Budget Rent-a-Car is still working with Trilegiant, the shady operators who send out “checks” you shouldn’t endorse. Signing the back commits you to an expensive membership in a “consumer club” with minimal benefits — all billed to the credit card you used when you rented a car from Budget. I reported on this back in January. I just received a similar solicitation this week, offering me a $10 check in exchange for a $219.98/year membership in “HealthSaver.” Shame on you, Budget, for pimping out the credit card data that your customers trusted you with.

Downgraded: Airline fees
Another week, another hike of airline fees. Continental, as part of its earnings report, is raising the cost of checked luggage by $5, bringing it to $20 for the first bag and $30 for the second. Also: Delta is adding a $5 in-person luggage fee for bags not checked in in advance online.

(image)

But the Sage site devoted to this offer makes pretty clear that you’re not guaranteed much of anything:

Complete 8 hours of volunteer service to a registered 501(c)3 non profit organization to qualify to receive 50% off the published room rate — or maybe a complimentary night (limited availability).

To qualify to receive maybe a complimentary night? What, were their fingers crossed behind their backs when they wrote this?

Maybe I’m just a curmudgeon, but if a hotel company is going to promote public service, they should have a more straightforward way of “rewarding” that service.

But if you read news reports, you’d get a very different view of the offer. Take the Associated Press. How could they so completely swallow the PR on this? In the AP’s report, they only tout the free night. There’s no mention of the 50% off voucher option.

If you want to take your chances, see this page for a list of participating hotels, and the contact information for booking a free night.

Hotels in the mix include the Sheraton Tempe, the Courtyard Monrovia, Courtyard San Diego, Homewood Suites Brisbane, Courtyard Denver, Hilton Garden Inn Denver, Residence Inn Denver, Hilton Garden Inn Orlando, Doubletree Atlanta, Sheraton Chicago NW; Courtyard Brighton, Detroit, Fairfield Inn Duluth, Sheraton Kansas City, Holiday Inn Omaha, Fairfield Inn Las Vegas, Marriott Charlotte, Fairfield Inn Cincinnati North, Courtyard Portland (Oregon), Renaissance Pittsburgh, Renaissance Providence, and Residence Inn Milwaukee.

(image)

The U.S. airline industry collected $566.3 million in baggage fees in the first quarter, according to the U.S. Department of Transportation. That was up 13.6% from the fourth quarter, and more than four times what was collected in the first three months of 2008.

US Airways showed the most impressive gains:

US Airways stands out as a heavy bag fee collector at $94.2 million, up 1,160% from the same period of 2008. US Airways collected more in baggage fees than United Airlines or Continental Airlines, two larger airlines but with more elite-level fliers and international passengers who escaped baggage tolls.

To be fair, a huge increase on a percentage basis like that is not hard to do when fees are new… Those growth rates aren’t sustainable, unless US Airways starts charging $150 per bag next year, and $900 the next.

Those stats also don’t take all fees into account, of course. (Coffee and soda fee, anyone?)

And what about the hotels? Bjorn Hansen helps McCartney out on that front:

Bjorn Hanson, associate professor at New York University’s Tisch Center for Hospitality, estimates that hotel fees and surcharges before state and local taxes will total $1.65 billion this year — that’s more than airlines have collected in baggage fees over the past four quarters reported by the Department of Transportation. Still, the hotel-fee haul will be down 5.7% from 2008 because of the occupancy decline.

Those fees include everything from resort fees to valet parking, so it’s not an apples-to-apples comparison with the airlines.

For those interested, the Bureau of Economic Research has more information on the declining first quarter travel spend numbers. Overall spending is down an annualized rate of 5.9% over last year.

Downgraded: Michigan’s roads
Several counties in Michigan are opting to grind deteriorated paved roads into gravel roads rather than re-pave them. The money’s just not there. That’s progress!

Downgraded: U.S. treatment of international visitors
Because international travelers to the United States, who are already subjected to fingerprinting, photographing, and prying questions galore, apparently haven’t been treated sufficiently like criminals… Homeland Security is now launching a pilot test of fingerprinting visitors as they leave the country as well. Be treated like a criminal when you come in, be treated like a criminal when you leave. Just lovely. Foreigners departing from Atlanta or Detroit will have the pleasure.

Upgraded: Free wi-fi on Virgin America June 24
Google and Virgin America are teaming up to offer a day of free inflight wi-fi, online games, and other hijinx.

Downgraded: Extended Stay Hotels … and the Federal Reserve
Extended Stay Hotels, the parent of Extended Stay America, Crossland Studios, and Homestead Studio Suites, filed for chapter 11 bankruptcy. And who’s left holding the bag? The Federal Reserve!

Downgraded: United Mileage Plus
United Mileage Plus has been on a downward trajectory for some time, but Gary Leff pinpoints the absurdity of United’s blocking of frequent flyer tickets on partner airlines. The airline doesn’t want to make those tickets available because it costs them money when you use your miles on partners. But other Star Alliance airlines don’t block partners like this. It’s a United-specific problem, and it’s getting absurd. Gary writes: “In the last two days I’ve been told ‘Lufthansa doesn’t fly to Frankfurt’ and (looking for flights departing Hong Kong) ‘Thai Airways doesn’t fly to Bangkok that day.’” It’s insulting.

(image)

Longtime readers of this site know that I’m a fan of the opaque booking sites (Priceline and Hotwire in particular) for finding great lodging deals when I’m traveling on my own dime (and not using points). And while there’s always an element of risk in booking a property without knowing the name and location, I’ve learned to embrace the “comfort” of knowing the star-rating and the approximate area of town where I’ll actually be spending the night. However, in my most recent use of the site, Hotwire really misrepresented the rooms it was selling.

I used Hotwire to book a nearly last-minute single night’s stay in Madrid on our recent 11-day trip through Spain. It was the final night before our flight back, and, to be honest, we really weren’t too picky about location or amenities. It was going to be a crash pad, plain and simple. So I checked Hotwire and found a 4-star hotel in the center of the old city for $69. Under 50 euros for a 4-star? Sold.

Hotwire provides the star-level, a partial list of available amenities, and a map indicating the area where the hotel might be. And the winner was:

Whenever I book a room this way, I immediately go to two sites. First, I find the hotel’s own website — in this case, the Apartamentos Turisticos Principe 11 — and I check the TripAdvisor reviews. Both screamed: “This is not a 4-star accomodation.” Heck, the Apartamentos’ own site proclaims their 2-star status.

A classic problem of the star-based rating system is that it doesn’t mean the same thing from one site to the next, or from one country to the next. Some countries have government regulators who determine a property’s number of stars, but also their classification (hotel vs. pension vs. vacation rental vs. hostel, etc. etc.). The problem in this case is that the 4-star classification has no relation to Hotwire’s own internal description of what a 4-star property is supposed to be. They offer examples of brands that could be, or at least represent the quality level of, 4-star hotels (Hyatt, InterContinental, Omni) and a description of the amenities you should expect at each star level. Here’s a screenshot of the latter:

No way was this a four-star. Not even close. It had a decent bathroom, it was quite spacious, and while its decor was minimalist, it still eked out some charm, with high ceilings, thick wooden shutters, and a tiny balcony that faced onto a busy but attractive side street. But it lacked just about every other characteristic of a four-star hotel. No onsite restaurant or bar. No fitness center. No upscale furnishings or bedding. If we were staying longer, sheets would be changed weekly. Etc.

And yet… we liked it.

For starters, it was a deal. $69?! For central Madrid? I’ve stayed in far worse hotels at higher prices (roadside motel in Grand Island, Nebraska, I’m looking at you!). No, it wasn’t the Ritz, but it was clean, and it had a nice vibe. The staff working the tiny front desk were friendly and helpful. The location was fantastic. The kitchenette was fully-stocked, if we had wanted to make a meal. The marble floors were clean. And the view onto the street was charming. It felt like we were crashing at a friend’s apartment, rather than staying in a hotel. And, again, it was only ~50 euros a night.

So, while this wasn’t luxury, and while we still enjoyed it (especially for the money), it still bothers me that Hotwire is selling these apartments as a four-star hotel. This was a big misrepresentation.

A few photos from the room, after the jump.